Exploring reporting– investment community views on reporting in the oil and gas sector

What do investors and analysts think of reporting in the oil and gas sector?

Our survey of investment professionals highlights clear areas for improvement and opportunities for management to set themselves apart.

How effectively are oil and gas companies reporting on key performance issues to investment professionals?

They also see potential for improvement in a number of areas – exactly the areas that might be expected when we consider what analysts and investors are trying to do. Investment professionals need a number of key metrics and measures when populating their models. In the oil and gas sector, these typically relate to cash flows and information on capital expenditure, reserves and replacement cost profits.

But simply providing the information isn’t sufficient. Investors and analysts require key information to be set out in clear, granular segments – only then can they understand and use it fully.

Investment professionals tell us that there are a few key measures that they value highly – these are the measures that are often seen to move markets. Investors and analysts not only want to be able to access them easily, but also to have confidence in their reliability. They need clarity on what all these key measures actually mean and consistency in how they are reported. Investors and analysts also told us they would like to see some more assurance around some of these key measures.

So how can management improve the quality of reporting to investment professionals?

Survey participants were clear about what they wanted; To meet those expectations we recommend that management teams:

Provide key performance metrics in a clear and consistent way.

In particular give high quality information about the ‘measures that move markets’ including production volumes, cash costs, average realised prices and proven and probable reserves.

Use appropriately granular segments or asset information to give useful data on those key measures.

Make sure consistent messages are delivered across all the reporting channels they control.

Keep the needs of the investment community front of mind when they report on company performance.

Oil and gas companies that take the lead in this can differentiate themselves from competitors, strengthening market confidence in their own quality as they do so.